A. I certainly had concerns about selling to a Japanese company before I became seriously involved in finding out what their intentions were with respect to selling technology. We're not really a technology company; we're an applications company. We're about three or four years behind the state-of-the-art semiconductor technology. We have sold some products indirectly into defense-related application in Japan during the past eight or nine years, but none of our major customers are defense suppliers. So we didn't have any problems with needing approval from the Department of Defense.
Q. Will Silicon Systems benefit from gaining access to technology from TDK?.
A. There's some advantages in the magnetics area, as you might expect. We'll be associated with the world leader in magnetics. And the semiconductor work they have done has been mostly in the power area--power devices and power integrated circuits--which we don't do at all. But we have had a need in some of our market areas to have power technology. So we've gained a lot of technology that ought to help us be better in the markets we serve.
The merger will help us accelerate our presence in the automobile industry, and will allow us to participate in Japan's auto market. I believe you will see us make our presence felt in power supplies, integrated circuits and in motor-controlled integrated circuits in areas other than computer disk drives. I think you will also see our products in the consumer area, where we have had no presence before. I'm specifically referring to integrated circuits in VCRs, in high-definition television, and in some other areas.
Q. Because Silicon Systems' stock price was low before the TDK offer, did the threat of a possible hostile takeover have any impact on your decision to sell the company?
A. I never worried, nor do I think any other semiconductor executive worries much, about the threat of an unfriendly takeover. It's real simple. You don't buy buildings, products and equipment as much as you're buying people's expertise. If you bought this company and the management team walked out, you'd be set back eight years. The first person TDK came to was me. They asked me what it would take for them to get a commitment from me to stay. And I told them. Now, I do not have a contract with TDK; I could write my letter of resignation and walk out of here this afternoon. But I will also tell you that if I did that, somebody ought to have me committed, because there is no way that I can make out as well financially by leaving here as by staying. As long as they treat me like that, and I suspect they will, and as long as I perform, we're going to have a great relationship.
Q. Did you talk to TDK's people about the issue of whether they would bring in management from Japan to help run Silicon Systems?
A. I not only talked about it, I went to them and told them that was an important ingredient for me. I am not only the president of Silicon Systems, they also have made me the general manager of TDK's semiconductor division worldwide. I function as a division general manager, reporting directly to the president of a Japanese company. The ability for me as an English-speaking American to effectively integrate in the company is very difficult. So I went to TDK's president and I asked him to assign to me someone who can work for me and whose job it will be to help me integrate into the company. I not only got one guy, I got two of his best guys, one from research and development, and one from corporate planning.
Q. What changes are in store for the company because of the merger?
A. The biggest and most positive ones are that we'll have the availability of more capital for capacity expansion than we would have had, and we'll have a bigger budget for product development. The profit objectives that I have to live with are substantially lower than I would have had to maintain a reasonable stock price as a publicly held company. Now I can focus on reinvesting profits for growth as opposed to putting profit into the bottom line for stock price.